![108 ⎸ [NICHE] Anti-Niche with Dan Luthi - podcast episode cover](https://assets.metacast.app/images/podcast/artwork/EWYKOZAj)
¶ Intro / Opening
when I put out a post asking Niche firm owners to come on the podcast, you're like, I don't have a niche. I I'm actually a generalist, but like, here's what I do. Like, you kind of still do though. Like, you're very clear about who you're not going to work with. Being clear on what you don't want is just as good as being clear on what you do want. So, kudos for that.
And hopefully our listeners are like, Realizing like, okay, you don't have to have a perfect like niche in order to be able to market. Obviously you've gotten as far as you have,
yeah. Honestly, you could probably think of any business like that you've ever thought about. We've probably worked on them in some way, shape or form, you know, whether it's, I mean, one of the clients that we worked on years ago was a human remains cryogenic freezing company, which was. Odd, right?
Like super odd and super weird, but it was, but it was super fun to work with because the, the logic that goes around it is very similar from a medical practice, but it was very unique on like what their billing structures was. And like, when they do R and D, like how that invests for long term and it's just very, very cool, but very different. But they also had the same needs as an e commerce business. They wanted to streamline the workflow.
They wanted to make sure that revenue was calculated correctly instead of it being instant. Sometimes it was termed. So it's going to be on a 30 year agreement or something like that. Like, just very, very different, but fun at the same time. Welcome back to the ambitious bookkeeper podcast. I'm your host serene Shoup. This is part of our niche series as part of this series, spanning July and August. You'll be listening in on interviews with niche, bookkeepers and accountants.
I thought it would be really inspirational and super valuable to bring on bookkeepers and accountants who have built niche firms to take you behind the curtain of what it looks like to get to the point of serving in a specific niche. My hope is that you'll gain the inspiration and information that will help you hone in on your niche. Or if you already have one. Find different ways to help your clients.
I'll be asking some similar questions of each of our guests, like what their minimum fee is, how they got into their niche and what their firm team structure looks like. I'm super excited to bring this to you. And I hope that you enjoy. If you're ready to hone in on your own niche and build a bookkeeping business that gives you the life that you want, check out the bookkeeping business accelerator by going to ambitiousbookkeeper.com/bba the link is also in the show notes.
If finding a perfect fit client is something that you've needed. Check out my mini course, the bookkeeping client closer, go to ambitiousbookkeeper.com/closer. All the links will be in the show notes. Now let's get into today's episode.
¶ Introducing Dan and the Anti-Niche
This is another podcast in our niche series. And this one is actually, we're going to go a little anti niche with Dan Luthi. so welcome, Dan. Welcome to the podcast. Would you like to introduce yourself?
Yeah, so appreciate you inviting me to be here. I'm excited to be here and kind of talk about us as a firm. But my name is Dan Luthi. I'm a partner at the firm Ignite Spot Accounting. We've been around for 15 years, and I've been with the firm for 13 of those years, which is fun and exciting. I've been around, I guess, the bookkeeping block for a long time. As you mentioned, we are kind of the anti niche.
We've been a general practitioner the entire time and have gone through ups and downs and benefits of all those kind of things that go along with it. But we have an awesome team of 25 employees that are fully virtual and spread out all the United States. And we work with clients in 35 different states as well. So really focused on just more of a key demographic of client size instead of a vertical.
Okay. So can you explain that, that demographic
Yeah, definitely. So we focus, we focus more on revenue size for clients. We feel like clients that are under a 1M usually have some complications and things that not necessarily our services are best fit for and then we kind of move up from 1M to that 6M mark, which is where we usually find. within the client space we work with where things get a little bit more complicated. That usually needs more someone more hands on internally, or we would need to put more effort in than what we want to.
So we're kind of that 1 to 6M range and ARR is really where we focus on.
Yeah, that's one of the things like when I walk people through starting a bookkeeping business, if they know they already want to go into a certain niche, great, but a lot of times I try to coach them more on like try to find like a revenue range or. Like a personality type that you like working with. And I know one of the things you mentioned before was, people that are tech savvy or business owners that are tech savvy, which is also very important in cloud accounting.
One hu Well, and that's a very important question we ask as a part of like our investigatory conversations and client more onboarding. Like I don't want someone who just doesn't want to work with technology because we find that that's crucial for us to be number one, a virtual organization, but also two, to be efficient in the process that we work with.
And so if you're willing to work with technology, we're super happy to work with you cuz that that changes the landscape of conversation and workflows that we can have as a client, with client vendor relationship.
¶ Organizational Structure at Ignite Spot
Yeah, that's so true. So with, being a generalist firm and having such a huge team, is that the main area that you do find efficiencies and how do you handle like, I don't know, training people and helping them learn the different clients. Like, what does that look like?
definitely. So, so our structure is, is a little unique compared to a lot of organizations too. I know there's a lot of people who like the pod form, you know, kind of demographic where you have bookkeepers who report to accountants and you have a supervisor over them. You have potentially people who work in multiple verticals and so you kind of compartmentalize them in that space. We've gone completely the opposite direction in that, where we have a bookkeeping team.
Yeah. that has a direct manager who supports them, but they work with accountants and controllers on other clients, and they have a direct manager who supports them. And so people sometimes get confused. Well, who's responsible for what? How do you manage things? Everybody's responsible for a set group of tasks. And responsibilities for each individual client.
And so that's really where we focus on our training and teaching and coaching with our employees is bookkeepers are focused on AP and AR and reconciliations and, and really the P and L more focused responsibilities and their manager, make sure they do a good job and they know how to do and they're really efficient with it. But then they talk with the accountant or controller that they're assigned with as well to make sure that they're meeting the client needs.
And then the accountant does their roles, which is payroll and balance sheet, reconciliations and reporting and KPIs and things like that. And then if they have questions about how to do something, or if there's an inefficiency issue that they need to work with, they talk to their manager about it. And so those managers job is really to make sure that. Those people in their roles are really good at what they do. And we're not necessarily getting lost in, well, this client wants to do this.
And that's why we're going to do it inefficient from here. Their job is to make sure that everybody is operating as efficiently as they can. And it's, it's under more of a standard SOP process across all of our clients, which is why we. Recommend tech stack specifically for our clients. And so there's only really 2 or 3 payroll companies that we recommend or 1 AP solution or very specific general ledger solutions or things like that, depending on the client.
And so that's where we found efficiency because we can kind of control the workflow, not necessarily the, not necessarily awesome cases, the actual output based off of nature or niche or something to that expectation.
¶ How the structure came to be
Yeah, that's really interesting. It's, neat to hear how different orgs are structured, like different teams. I'm curious, like how you arrived at that, like. That place. Did you try the agency pod model first and then move over? Or is this how you started out and you've just found that it works, like
yeah. So we started out with a pod model. So we had 3 supervisors who had accountants and bookkeepers that were underneath them. And we were trying really hard to make sure that there was no cross between pods, but that was 1 of the issues we were running into. It was really hard to, to keep our team fully covered with revenue or be able to make sure That each individual person was meeting certain capacity.
And so we were finding we were over hiring for some specific teams and things of that nature. And so that was 1 of the big struggles is that we were finding that people actually like a bookkeeper who we just hired would still have a bunch of capacity, but team B didn't have any capacity on bookkeepers, but they had a new client that was coming on.
And so we were now overlapping into team a and It just wasn't working on managers supporting everybody correctly on how we were trying to run and operate. And so we moved to this model because we felt like it was allowed us to not just run lean, but run more organized and more organized based on process instead of on specific client wants or needs, which, which I think has been good for us on setting clear expectations with our clients from that perspective as well.
Yeah. And I bet you don't get a lot of, scope creep because like the people are like, this is, no, this is my task. Like, these are the tasks I'm supposed to be doing. That's not inside my task, you know, list. Oh, that's not inside mine either. Oh, it's not. It's not even part of the client's scope, so no one's gonna do it.
Yeah, we, and I think I love that comment because that was, I mean, about, I think it's about two and a half years ago. We were finding that like scope creep from clients and then scope seat from our staff was massive. Like that, like that influx of who wants to do what and how we're trying to help and what we're willing to give away and what the client. Oh, it's easy. It only takes five minutes that that whole focus. It was just really getting out of hand and you, you couldn't control it.
And so, like you said, by really heavily defining roles. Our team is not afraid to say, like, that's out of my bucket. That's not in my purview, but this person who's on your account, it is. So let me connect you with them. And that has made a world of difference because accountability, which is really difficult to manage in a virtual organization became more natural for everybody and it wasn't like, oh, it's not mine and they throw their hands in the air.
It was more of like, this is the person you need to talk to because that's outside of my, function for you as a client. And they brought that person in and we're able to interact with them and so it, it was a positive thing truly for us to kind of go that direction instead of. kind of creating more, more structure, more responsibility, more checks and balances and things like that and so it helped quite a bit.
Yeah. And from the client's perspective for them, it still feels like the agency pod model, right? Because they still have the same bookkeeper, the same accountant controller.
Correct.
Right. So for them, yeah, that's great.
Yeah. For, for them, they loved it because it actually created more, it created more connection with the other people on the, team. I mean, historically, like our accountants were really the main point of contact for everything. But then they were also getting looped into bookkeeping roles. And I think this is super common, even in the pod model is whoever that main point of contact is for the client.
Oftentimes really is the person who does a lot of the extra scope, seep and scope, scope, creep responsibilities, because it's hard to relay that stuff to everybody else. It's sometimes you don't want to be the person that doesn't know, you know, all that kind of stuff. And so that helped a ton in being able to kind of push that. Cause now the client sees two or three people. As a part of the relationship. It also helped with like attrition.
Like employee transition and things like that, like when someone left, they still knew two people that were assigned to their account. It wasn't like they lost the only point of contact. And so that just made it really easy, a lot easier for our clients to feel, you know, better connected to the organization instead of the individual to
Yeah. Wow. Didn't even know we were going to go here.
definitely that's, that's the anti moment, right? Like, that's the, that's it's, it's created some efficient, but also it's also created some complication. I think people in niches have the same issue. Yeah. When you have to characterize or train people specifically in one function. Sometimes that's outside their scope and it takes a little while to train and coach and teach them and and maneuver through it. But, we've kind of gone through similar type roadblocks for ourselves in the process.
And sometimes it's harder to market. To general practitioner because it's as a general practitioner, because you're not advertising. We're amazing at this. it's more of we're really good at this. And this is how we can change and cultivate your, your business. And here's our process of giving you value add in it. And so it's just a very different conversation, which is, which is still been good for us, but also just Different overall. So it brings its own problems.
¶ Marketing Strategy
Yeah. So that being said, we're kind of transitioning to the marketing conversation. How, how did you grow the firm to where it's at today? And is that the same strategy that you're now using for marketing?
Ooh, I love that question because we actually just changed a lot of our marketing strategy. So I like I like that question. So for a really long time, I mean, I would say probably the last 10 years we've really focused on organic type lead generation. And so everything was really built off of an SEO model of content and, trying to create the right type of information that leads the right people back to our organization. That's a really that's the long game.
I feel like when it comes to the marketing strategy, it doesn't always bear fruit immediately, but it's allowed us to create a presence for ourselves. It's allowed us to create really good content for people to reference off of. But at the same time, I think we've built this really great database. So for a really long time of good, valuable content that's still relevant, even some of the articles we wrote years ago.
And so now we're pushing over into more of a paid to play kind of, you know, advertising model where we're doing pay per click. Put that brand and that asset that we've created kind of in the forefront, let people see that, but let's pay to put ourselves at the top of the list instead of having people click through three pages to be able to find us. And so, That's kind of we just started making that change over the last couple of months, and it's starting to see some fruit.
And I'm sure we'll change that a little bit again in the next couple of, you know, 6, months or something like that. But, I just feel like that's kind of where our market needs to shift from us from a, from an advertising marketing standpoint.
¶ Local vs National Clients
Yeah. Do you help then, clients across the U S or do you do some local stuff? Like what's where your client base pretty much reside.
Yeah, no, that's a really good question. So we, our partners, all of us live in Utah. So all of us are actually located. We live within like, 5 miles of each other. And that was never designed, but we do, from that perspective, but we work with clients, all the United States. And so we do have a presence here in Utah from when we originally started and just from the initial creation of the organization being here. but we have a really large presence back East.
A lot of clients that are based in New York and kind of the New England area. Yeah. As well as we have a lot of clients that in California and Texas and Colorado, but over the last, honestly, the last 12 months, we've had a really crazy increase in clients in Hawaii, which has been really cool. So it's been fun to kind of interact with clients in a very different time zone, but also different cultural expectation. And we've been able to make a really big difference for them.
So it's been, been fun to kind of be all over the place. And so we, we do service clients in about 35 different States. And so it's been fun just to kind of have different experiences all over and get different types of culture and client needs.
¶ Sales Tax
Wow. Do you guys handle sales tax at all?
We do. Yeah, that's, uh, sales tax is fun. That's the one part that I think a lot of people hate sales tax, but I, it's evolving so much right now. It's interesting to me. And so it's one of the things I actually still do for when it comes to our clients. I do the evaluations with our clients and things of that nature, but yeah, we do sales tax. It's a, it's a
Yeah. Yeah. Me too. So that's really interesting. That's, one of the things that, yeah, I, I haven't found a lot of at least solo bookkeepers that will touch it, maybe bigger firms. I'm going to be selfishly curious now. You said you still touch sales tax, but do you have a team that supports sales tax efforts or is that something that like the bookkeeper handles, like how do you structure that?
Yeah. Yeah That's a really good question. So, historically we had the accountant role is the person who did all of our sales tax filing for each of our clients. And so they collect all the information, they do all the logins, everything else like that. Over the last, it's been a process for us when we're kind of changing it internally to, to be more streamlined. We have one person who's dedicated to it now who supports about 50% of our clients on a reoccurring filing process.
we use Avalara's managed return system. To aggregate all of that together, which has been really good for us. Like if a client has avatars, it will integrate and bring that information in for us. It has options for importing data for our clients that don't have a layer or using third party, you know, AR systems. So we've been using that, which has been really made it a lot easier for us to file and kind of keep it all together.
We still have some that are parsed out by the individual, but it's all coming together a lot more efficient. We have a stronger team that supports it. On my side, I do a lot of more of the introductory and investigatory conversation. So clients who need audits or, you know, for us to do a review or new study or something like that. I help facilitate that with the clients just to be able to make sure that. We're touching all of the things that are needed because it sells taxes.
So it's, it's changed so much over the last probably 24 months that, to keep up on it. It's really hard for a whole team to be able to keep with it, especially with all the rest of the client work that they support.
Yeah. so what was the software? The Ava manager.
Yeah. So Avalara has a product called MRA. So it's managed return, by Avalara. that's our manager transfer accountants is what it's called. That's the tool we use and it works out really, really well. To be honest with you, it allows us to be able to, to bill our client directly for the returns that we file. And, it makes things really a lot easier for us in that process.
And the client, do they need to have their own subscription with Avalara or their own product?
They don't have to know. That's the part that's really nice about this is if they do, it's great. Cause it will, it'll integrate with it back over so that they're all in the kind of the same space. But if they're not, we can export information from another system and import it into. To the MRA system, which is awesome.
this 5 little second conversation with you is more valuable than 5 meetings I had with Avalara.
Well, and I think that's one of the things too, is like Avalare has got, there's so much that they do they offer and they're so big and, and honestly, they've acquired so many tools over the last two or three years as well. I think sometimes it's hard to know which are the right tools to use. And, and I will say this MRA has been a, it's been a system we've had to learn how to use effectively. so the person who does it on our team, her name's Elena. She's amazing at it.
She has a really good understanding of how the imports work. She understands how the integrations work. She knows how to set up clients really cleanly, like what to ask from a client when we're onboarding them, how to go through all that. And so having an expert on that makes a world of difference. Like if she wasn't here, we'd be lost. When it comes to that stuff. So it's, it's important to have that person manage and go through that and kind of learn the process overall.
But yeah, it's been, it's been great for us. It's made it a lot more easier for us to manage sales tax from that perspective.
Yeah, we currently use tax jar for the clients for most of the clients we file sales tax for a couple of our clients just have filing in one state and it's been easy enough to just handle it ourselves because it doesn't integrate with anything anyways. Like, but the clients that have like Shopify and. All the things that the payment processors that you can just integrate with, with tax star, that's been our solution for them. but they don't handle international stuff.
And some of our clients have international sales. So I've, I feel like this is a project I've been trying to master for years now.
Yeah. Well, and the tricky part about, about tax turn, this is the issue we always ran into is. If you have multiple cell systems coming into one, there's, it'll bring them all in, but like you can't import something into it. Like that was the issue we always ran into. And so you're really relying on Shopify or Stripe or QBO to like be perfect in how it's calculating. And we had errors in the process. And so that's part of the reason why we chose to go with Avalara versus TaxJar is.
Our clients were just, and it probably is honestly just because we're more of that general practitioner. So there's 12, 000 different solutions on how a revenue is recognized. It was easier for us to use that system because we could customize it a little bit more on the import per client instead of, instead of having a very standard approach, which I think you can do a lot easier when you have a specific niche or vertical that you're focused on
Yeah. So speaking of tech, using tech to, , streamline your process. Cause that's where mostly you're finding efficiencies, right. A couple things. I totally just lost my train of thought because I was thinking forward to a different question. I wanted to ask. So I'll just ask the one that I know right now, in your bio, which anyone can read on the show notes. I just don't like to read out the bio. That's boring,
Yeah, definitely.
¶ Being on the Partner Council for Intuit, Bill.com, Gusto, etc
but I do still read the bio before I interview people, but in your bio, you talk about being on the partner council for intuit for bill. com for gusto. Am I missing any, Okay.
Yeah. So I, uh, I do some affiliation with Avalara as well on a different council, which has been great. It's not necessarily product related, but more just industry related. And then I'm on a partner with accounting salon as well. And so there's a lot of us that, learn from all the other firms and things of that nature, but a partner council is huge for us, for sure. That's been a very big asset for us as an organization.
How so is that because you have input on how programs are designed or? Talk me through that.
Yeah, I, I think this is 1 of the areas that we were really lucky to get started with, Intuit on this, being a part of Intuit's partner council back in I think it's when we 1st started, it allowed us to be able to learn. Really heavily about the product as a whole, but also play a part and giving feedback on areas that, that we felt needed to change in order to be a good fit for not only us, but for our customers. And so we've leveraged that really heavily over the last, you know.
6 or 7, 8 years. And just from the standpoint of we want to make sure that our software partners really understand and know that we care about the quality of product they provide because it, it's a reflection not only of us, but of them in that process. And our goal at the end of the day is to make sure that all of our clients are still in business 345 10 years from now, and we can't do it unless we communicate to make sure that the product that we're both putting together.
Meets the needs of each individual client that we're working on. And so, it's been really fun to participate in those councils and participate in giving direct feedback regarding what potentially needs to change on how, you know, what little app is working when it comes to, you know, invoice creation or how payroll is being referenced or integrated into this general ledger or whatever it is, like all of that's been massive.
For us and just creating better, better connection and better quality of experience overall as well.
¶ Xero or Quickbooks?
that's pretty awesome to hear. So I think I remembered, unless I just made up a new question, but my other question is, I know you said you recommend just a handful of payroll software providers, but do you exclusively work in QuickBooks online or do you do other accounting systems as well?
Oh, that's a great question. So for a really long time, yes, 100%. We were a desktop company and then we moved to QuickBooks online. A lot of our clients have been demanding other GLs. And so, we're looking, have it more heavy into Xero right now, just because that's a real big question mark for some of our clients. It's been something we've tossed around for years. Historically, we've turned those clients away.
But it's one of those things where we feel like the rest of our workflows and tech stack can be a great fit for a lot of those clients. And so general ledger isn't going to be the only thing that we, you know, we want to hold up a relationship with. And so we're happy to have those conversations. Those two, in my opinion, at least for just my perspective are a lot more similar. And especially fit that demographic of client size that we're working for.
And so those are really the only two right now that we're focusing on as QuickBooks online is Xero. We don't necessarily, we've done Sage intact in the past. We've done NetSuite in the past. Usually they're more comprehensive and larger clients and just not necessarily in the niche that we're looking for. Or that client size or vertical we're looking for. And so we've, we've stayed away from, from going in those directions.
¶ Being Hands-On or Hands-Off with clients and software
Yeah, typically like those ERP systems, it's like you should have an in house accounting department in order to really utilize that system appropriately. And, yeah,
well, and even if you don't and if you because I mean, I know there's a ton of firms out there that specialize in those platforms, but you have to have like a much more hands on relationship with those with those clients and that's That's just what we haven't decided is the type of relationship we want, and it's not that we don't care about our clients, but I mean, I don't want to, I don't want to have to be connecting and working with them on every single day or
every moment or, you know, be on call. And we do have a few legacy clients that we've worked with for, for the last 10 years that are a higher touch from that perspective. But honestly, we can't do what we're really good at with those clients because that's not as efficient as the rest of our workflow is. And so. We've straight away from, from that kind of high touch, which is what we found was needed for both of those. Those solutions.
Yeah, at least if you're providing the bookkeeping side of things like that, it may be okay if they've got really tight operations and the people on the ground in the company are using the rest of the system appropriately, but that's usually not the case if they're outsourcing accounting.
Yeah, definitely. Well, and we, treat the like inventory management the exact same way. Like, we've got a few clients who use fishbowl, for example, and like, we don't touch that. Like, because that's like, that system requires a lot of knowledge of its inner workings and workflow. And so we're very clear with the client, like, we'll help you set up the integration and we'll make sure it syncs, but that's on you. Like, we're not going to take that on.
And, and that's where you start getting to that really tricky area of like, what you won't do versus what you will do. And no one ever wants to be the person who tells a client yet. Yeah, I'm not doing that. Cause that again, just starts creating friction in the relationship for sure too.
Yeah, that's something that a few years ago I added to my engagement letter, a section of like what you're responsible for doing as far as the finance accounting stuff, you're paying your vendors, you're paying your employees, even if we set up gusto, you enter the hours, you approve them, you run payroll, like, and you invoice your customers and collect payments from them.
Occasionally, if one of our clients is having a problem collecting from one of their like bigger clients or whatever, if it's like a one off invoice, I'll send an email on their behalf just to kind of like flex a muscle and be like, Hey,
This matters.
our client needs your money,
Yeah, definitely. Well, but, but I think that's a good call out though. Cause I think that's, those are some of the most important parts on when you're setting up your firm or you're working through it is like, know what your limits are and what you're willing to do and not willing to do. I mean, we do AR, we do AP for our clients. And so we're happy to work with bill. com, but that's the one thing for us is like, if you want AP, that's the system you're going to use.
Like, I'm not going to use Melio. I'm not going to use Vame. I'm not going to use your bank feed or whatever it is that you
your bank bill pay with no, uh, no controls.
yeah, because it's not a, it's not a proper control for us being a virtual organization. It doesn't, my, my, honestly, my insurance company doesn't like it, which is important to me. Like, I need to make sure that they'll cover in the event that a mistake happens. That covers my butt, but also gives peace of mind to all of our clients that, we take that very seriously. But I think that's 1 of the biggest parts.
Like, if you're not willing to put that kind of context in place on your boundaries, like, don't do it. Right? Like, don't take on those services because there's too much risk for the, for the client and for you when it comes to those things. But you did mention payroll, like we will do payroll, but we there's specific partners that we want to work with, because we understand and know how to use them. And it's, and that's something that's important to us too.
And that process is we want people that we actually understand and know the platform so that we can make sure we give proper recommendations to our clients on it. And AP, you can force a platform payroll. You can't because everybody has very different needs.
Yeah, that's, that's so true. I think, from our client base, we work with three different payroll providers. JustWorks, ADP, and Gusto. The majority of our clients are on Gusto, though. If I have anything to do with it, we set them up on Gusto.
Definitely. No, that's awesome. Gusto is one of our big partners as well. We've got, ADP is another one and we use Rippling, for us and some of our larger clients that are a little much more multi state and, and from that perspective and have more, work from home employees like we do. Rippling seems to do a really good job for that from that perspective. But I, I'm diving into just works more. We've had a few clients over the years that have had them.
And I love that they're actually releasing just a general payroll software right now too. And that's super intriguing to me to like, understand that that's, that's a much more versatile option too, for some of our clients
¶ Rapid updates and involvment in product innovation
Yeah, absolutely. And they're making some improvements to things. So yeah, I mean, just like with any software, and that's what I try to You know, let people know about is like, whatever it is today, like, maybe it doesn't solve all your problems today, but you communicate with the software, you let them know, like, you submit feature requests and things like that. So they know what you need. And they're constantly improving.
It's not the same as like back in the day when you bought a software from a CD ROM, you installed it and then you had to wait every quarter or every year for an update for the new CD. Like the changes are real time. So things are improving constantly. And, that's really fun and also challenging.
for good and bad, right? Like that's, I was talking to someone at scaling new heights last week and they were asking me like, How do you manage all the changes in platforms?
And, and I said, honestly, it's a great value asset to like have platforms changing, you know, we have some partners that we have that we work with are changing every week, like ever, like I think Divi, for example, and I'm Divian ramp, for example, roll out new updates in the software every single week, and you can see it on their website. This is what we did. This is what we're doing. This is what we've changed. Like, here's your feature request. Here's all that kind of stuff.
Like, how awesome is that? To know that you can play that much of an active role in it versus like the desktop days from, you know, a decade ago when it was once a year, you get a real update. And it, and you don't even know if it's going to be the update you're hoping for. Like you don't even know if it's going to actually change the landscape of what you need. It may just be a software patch or yeah, or a payroll tax update. Yeah. Like it may not be material for you.
And so that that's where I think it makes a world of difference too. Is like you're, you're seeing tighter security patch integrations. And especially right now with chat GPT and AI becoming so much more, you know, prevalent in conversation. We want. You know, innovation on platforms right now, because it's, it's just going to change the tools we use dramatically.
Yeah, this actually reminded me that I need to see what the status or request something from Divi. Like, oh yeah, I can request that or see if it's already on their roadmap.
Yeah, definitely. Well, I think that's one of the cool parts too, is that softwares are getting so much more open. With what the road map are, but also the request feature list, and you can see the changes and what you want and where you're coming at on priority and all that kind of stuff. And I love that because it's, it allows, it allows you to feel like the actual software partner is a partner in your adventure and partner in what you're trying to accomplish too.
Yeah. , okay. I'm looking at my other questions. Let me see.
We went off on a different on off a different
Now I'm like, there's definitely a few questions. I want to make sure I ask all of my niche firm owners, and in your case, anti niche, but,
Yeah,
¶ Pricing Strategy
We talked about your team structure. We talked about, I think you mentioned the number of clients you have, and My next question is around pricing, like what your pricing strategy or model is, basically, like, do you try to do value pricing? Do you have a flat fee structure? Do you do menu pricing? Like, what do you do there? And do you have a minimum fee?
Yeah, no, that's a great question. So we do have minimum fee. Our pricing model is actually built off revenue. So whatever the client's ARR is, like a rolling 12 months ARR, that's what we bill them on a monthly basis. And we, we review and audit that every single quarter. And so, what that means for us is we've decided on certain percentages within the 4 packages that we offer to our clients.
And if you want a bookkeeper package or an accountant package, you're going to pay a very specific percent. That's associated off of your total gross revenue. if you don't want maybe 1 of the services that's included in the accounting package, that's totally okay. But if you chose the accounting package, we're going to attempt to service everything with that. And you'll pay the same price for it. So, historically, we would do a much more aggregated like shopping cart type model.
And it was, it's hard to set that up, but it's also hard to adjust it and make sure it's, we both have the same interest in mind. And so we've switched to this percentage based model because we feel like it, it aligns our interest, which is helping clients grow with them actually growing. And so our fees are tied to it. That being said our base model starts at a million dollars in revenue, so if you're less than a million, you'll still pay the same fee as if you had a million dollars in revenue.
And so that at least gives us. peace of mind of what those reoccurring starting prices are going to be for those fees and allows us to make sure that we can still cover our costs.
Yeah, I like that. Doesn't really work in a startup environment unless of course they're willing to pay the price of a million dollars in revenue, which they might be okay with if they are like a SAS company that is like, you know, getting funding and their, their goal is to be at a million in revenue in a year or whatever.
definitely. And that's one of those things for us too is like we've tended to stay away from startups because it's not, it doesn't always mesh with like what we provide as a service doesn't always mesh with their goals and incentives and focuses. And I found too, in a lot of cases that startups oftentimes need way more. Then what you offer on just like a regular business, it's been going for the last two or three or four years, or even 20 years.
and there's a different set of tasks and requirements to help them to grow the right way. And that's hard to scale, from our perspective. And I know there's a lot of firms out there that do a crazy, amazing job on startups and I applaud them because their structures are built for that, but, it's never worked into our workflow, which is, which is okay. I'm totally happy waiting for them to hit a million and then us take the next steps with them.
¶ Common Client Types
Yeah. So that being said, you must get a lot of clients where they come to you, maybe from another bookkeeper or another company. Do you have a, a trend of, Oh, we got a ton of clients coming off of bench or QuickBooks live, or is it pretty well dispersed? Like across the board?
yeah, no, honestly, a lot of our clients come from people who have been doing it themselves for a really long time. Usually it's, they're at that size where they've hired an office manager or someone to help them with internal things and they were doing it for a really long time. We don't actually honestly get a huge amount of clients that come from a whole lot of other firms. Like that's not the primary bread and butter. We do get some, like definitely get clients from bench.
Definitely. I've had QuickBooks online, you know, clients there are QB live clients come to us and from other firms, but most of them are from internal teams where it's the owner is looking to not have to do it anymore. Or To stop using their mother in law or their father in law or someone internally they want, they want a scalable solution that gives them more touch points and expertise, which is, which has been great for us.
¶ More on the anti-niche
Yeah. Oh, so many of my, like my, My wheels are spinning. Like I S I have so many questions. I'm like, let me look at the time, make sure we're not like going over. Okay. even though like we started off, like when I put out a post asking Niche firm owners to come on the podcast, you're like, I don't have a niche. I I'm actually a generalist, but like, here's what I do. Like, you kind of still do though. Like, you're very clear about who you're not going to work with.
And that's almost just as good as, as being like, being clear on what you don't want is just as good as being clear on what you do want. So, kudos for that. And hopefully our listeners are like, Realizing like, okay, you don't have to have a perfect like niche in order to be able to market. Obviously you've gotten as far as you have,
yeah.
but
been around for a while. Yeah.
and, and those pieces are generally pieces that we include in like. Our niche marketing anyway, if that makes sense, like it's, it's like a byproduct of, well, this is, we work with online businesses. A byproduct of that is that they are very tech savvy. They are willing to do things virtually. They are willing to go onto the software that we want to use. And it's like, those are all the same things you have. The only difference is the industry.
Yeah. A hundred percent. Well, and, and I think that's, that's part of the reason why we've stuck with this approach. Like, honestly, my team and, and me as, and my partners, we kind of enjoy the versatility of working with different types of businesses. I mean, Honestly, you could probably think of any business like that you've ever thought about.
We've probably worked on them in some way, shape or form, you know, whether it's, I mean, one of the clients that we worked on years ago was a human remains cryogenic freezing company, which was. Odd, right? Like super odd and super weird, but it was, but it was super fun to work with because the, the logic that goes around it is very similar from a medical practice, but it was very unique on like what their billing structures was.
And like, when they do R and D, like how that invests for long term and it's just very, very cool, but very different. But they also had the same needs as an e commerce business. They wanted to streamline the workflow. They wanted to make sure that. Revenue was calculated correctly instead of it being instant. Sometimes it was termed. So it's going to be on a 30 year agreement or something like that. Like, just very, very different, but fun at the same time.
Yeah, that's, it does add variety. And I will say like, even when you choose a niche, it makes your marketing more pointed and, and easier in that regard, but you're still going to get people coming to you that aren't in your niche that want to work with you and you still can say, yeah,
¶ Refferal partnerships
Yeah. 100%. 100%. Yeah. And that's one of the parts that I think that I mean, honestly, like, I would suggest this and my in my position if someone was a very specific on being an itch and they only wanted to work with restaurants are they and or even boutique restaurants versus just like, you know, generalist restaurants or franchises like find a partner that you can refer those people to like don't just say I can't do it like find someone else that you know and trust.
That you can give that person to and work out a referral arrangement with them. Like how great of a relationship could that be? Not only for you, like another source of revenue generation, because you're already marketing anyways, like have it cover some costs for additional marketing in the future and build platforms for them to push things to you. And it kind of grows outside of their need, if it's a generalist or something like that. And, that's what we've always tried to do.
And it seems to work out really, really well for our clients that are looking for something different than what we can offer.
yeah. So you offer bookkeeping payroll sales tax. Do you guys offer income tax or no?
We don't, we used to. Yeah, for a lot of years we did and, in 2022, we made the decision to stop. It wasn't a big enough, revenue generator for us as an organization to carry the burden of it. And honestly, like, to have 1 person try to source all our clients in multi states, like, we didn't find we were as good as what we wanted to be with it. And so we've in 2023, we decided to partner with another firm who focuses specifically on tax who has a. large team.
And so they're able to be much more diverse and much more qualified to support those clients. And our customers love working with them because they're just like, yeah, they know what we're talking about and they're experts and they have this and they have that. And it's, it's just made the relationship a lot more solidified than what we were able to offer.
Did you lose any clients in that process?
We didn't lose actually any reoccurring clients from that process. Definitely. We lost all the tax revenue from it from that perspective, but we didn't lose any customers like our clients were happy that we were and we presented it to him in the way of like, we want what's best for you. And it's honestly not us that's going to be able to provide that to you with this space, but we partner with these people.
So we chose a very solid partner to give them, you know, to pass it off to someone who was qualified to do those things so that we still work together. So it's not like. We're just saying good luck and Godspeed and,
Yeah. Go find a
It's yeah. Yeah. Hope, hope they're good. It's no, these people are great. They're qualified in what they do. Sure. It's different price than what we were offering before, but here's the benefit that you get from them versus us. And they do credits and they do this and they do that. And it just creates a much better relationship with the client on tax needs.
and it relieves a lot of stress from your team. I'm sure.
100%. Yeah, no, it's makes my life a lot of closing books at the beginning of the year are a lot easier for us now. I mean, 2023 was the fastest annual year and close that we've ever had as a firm in the last 15 years, which has been awesome. Like, we were pretty much done by February 15 with 1099 and year and close like. So are we no longer had to like set expectations for extra time or needs from team like we were done. It was everything's ready. Set it off to client CPAs and let's move on.
And whereas historically, it's been well, the tax account wants to do this. They want to talk about this. They want to drag this out. It's like, Oh, my gosh, it's September before we get all the clients wrapped up and closed for the prior year. So yeah.
Oh man. So, okay. This is you. You do not have to feel like you need to answer this question and we can cut this out of the recording if need be. I'm totally okay with that. Did you sell the book of business to this other firm?
really good question. so we actually, when we decided to separate it, it was about the same time that we actually lost the person who internally was working for us. their father in law owned their own practice and was retiring and said, Hey, we want you to come, you know, I want you to come take this over. And so our clients had enough good relationship with him that we just were like, great. Take care of the clients. Take those ones with you.
With our new clients that were coming on our clients who were looking for someone different or didn't want to potentially work with that person anymore. We then suggested they go to this other firm and so we didn't sell them per se over to them. It was more of this is all about the good grace of us just giving clients The right solution. sure we could have generated money from it, but it wasn't that much of a priority for us. The reoccurring revenue model was much more of a priority for us.
And so we decided to keep with that as our, directive. And if we get kickback great, if we don't, that's totally fine too.
¶ Not Selling Book of Business
Yeah, and eventually, like the whole referral relationship, I get this question a lot from other bookkeepers, like, do you set up you know, an affiliate agreement or a referral fee or whatever? And I offer a referral fee to my clients who refer us. Other clients, but they don't refer us for that fee. I just end up sending them a check in the mail. But like, for the most part, it's like a goodwill thing. It's like, I'm going to refer you. It's going to come back around.
Like you're going to get clients from them in the long run that are recurring revenue. And there's always an opportunity cost of like, yes, you could have decided, let me, let me sell this book of business. Now I need evaluation. I need legal council, I need all of this, all of this adds a cost and it might not be worth it. And he might not be willing to pay that much to cover those costs.
Like, and all the time and stress involved of a business, you know, acquisition or a sale, like there's an opportunity cost for everything. Yeah.
Yeah, you're 1000% right. Like with our agreement, we did have, with a prior person who was with our firm who left and we let him take some of the clients. We did have him sign an agreement that he wouldn't try to sell bookkeeping to them. Like that was the biggest, most important piece to us. Because that was our bread and butter. Like that's what has kept those clients with us. And, and he's totally great with it. And there's been no issues with it.
I mean, honestly, we were, we're past 12 months from since he left, like, and it hasn't caused any complications with our current clients, which is great. Like, I'm happy for that. Because at the end of the day, to me, that's no different than our software partner relationships and like our investments into those, like, I'm willing to put my time into a relationship with Gusto or Intuit or Bill, because I'm going to get a better product. And so is my client in the end.
My goal is still for the client to exist in 12, 24, 30, you know, 36 months. Why would I sacrifice that for being concerned about a hundred dollars referral fee or a hundred dollars like, you know, selling costs or something that nature, like it's just, sometimes it's not worth the risk of trying to have to navigate that area. And to your point, the opportunity cost oftentimes isn't there.
Yeah. It's kind of like. It's kind of like the S Corp status or renting versus buying a home. you might get a tax benefit from it. You might get a monetary return on it. But you've also spent all this time and effort and energy and other costs and getting to that point. So you just have to evaluate it based on your own personal goals. So,
Well, I think of it the same as I mean, how many survey requests do you get from software platforms and say they'll give you 15 bucks for for 20 minutes of your time. Honestly, I make more than 15 bucks for 20 minutes of my time and work so why would I ever commit to 15, you know for 20 minutes for 15 like I don't care right it's got to be worth it to me. That's the same as that, like. What do I gain from it? Sure. I get a little bit of revenue. It's one time though.
In most cases, like most partnerships are not going to commit to like in perpetuity of commissions on, especially in a tax agreement for the next 10, 20 years while you're working with them, like they, they're going to do it once and they're going to buy it out and you're done. Like it would have to be very material for it to be worth it. And for us, our tax practice wasn't material enough to make that, difference.
¶ How did Dan get into Ignite and Advice to Firm Owners
yeah. This has been so good. I don't want to go over time. We might have to have you on the podcast again. if you could give since you've been, you've been at this a while, like, what did you say? It's 15 years.
Yeah. I've been with the firm for 13 of those 15 years. Yeah,
Okay. So you have some skin in the game.
Just a little
You've earned your stripes. If you like, I don't think we talked about the beginning of you, starting, did you start the firm or did you like join it and then become a partner?
Yeah, I joined it. So I started as a bookkeeper. I started at the, at the bottom and I have worked my way up to being partner.
That's pretty cool. Okay. Now I feel like I want to have a whole nother conversation about that.
Happy to for sure.
But in the interest of time, if you were to, so now my question, maybe it does need to change because I'm like, if you were to go back again and start all over, like, what would you do differently? But yeah, maybe my question should be more related to how do you, how do you get someone like you? So for someone who is building a team right now, how do you get someone like you to want to move up to that point? And what incentivized you for that?
I think they're both actually really, really good questions. and I'll answer both of them because I think they're both really, really good questions though on the 1st question of, like, what would I do different if I went back to do it? I mean, we've learned so many different things over the years. Just in, like, the breaking something and having to retry it and go through it. I feel like truly for us as a firm, we've grown more in the last 5 years than we had done the previous 10.
and the reason why is because. We started collaborating more with other accounting firms. Maybe we're not selling the same products and maybe we're not referring, but we know them and we talk with them about like, what is successful for us. And if I'm struggling with something like, how did you deal with this? And how do you work through this?
Like that has made a world of difference for us as an organization, because it's, it's allowing us to use other people's experience, just like, you know, just like we have. To to help us to kind of level up faster and learn faster than having to cut our teeth through the entire process.
And, I think it's part of the reason why firms are that have started in the last 5 years are bigger than us, from that perspective to like, they didn't have to learn all the things that we learned over that period of time because they're collaborating. They're more comfortable knowing that there's enough for everybody. We don't have to, we don't have to say, well, these are mine and I don't care what you're doing. We're just going to kind of take our own space. And so I think that's 1 thing.
I wish we would have done a little bit different collaborative a little bit more. But for me on people and investing into people, I think the biggest part is, is recognizing. Those people who you feel like, or can make a change in your organization, and show them that you genuinely care about their future. Some employees and this is, there's nothing wrong with it. Some employees are looking for a job and that's totally okay. They're still great. They're good quality.
You want to make a life for them and you want to kind of maneuver, you know, make sure that they stay with you forever. But some employees want more, they want to grow, they want to develop, they want to become something different. And so for those people. You have to create a different plan for them. You have to create a different structure. And, for our team that we have, I've got employees who've been with me for, you know, for eight or so years that are happy being bookkeepers.
And I absolutely love that because they we need them. We need them to be really good at their job to be successful for our controller services for our CFO services. And so I make sure their life is as good as I can make it. But for the employee who wants to grow from being a bookkeeper to an accountant to controller and is investing their own self into it. Well, man, I, I've cut my teeth in this. How can I help them to grow in that space? Like what tools can I provide to them?
And sometimes it's taken into conferences. Sometimes it's giving coaching lessons and spending one on one time. Sometimes it's just giving them opportunities to vent and give you feedback on things like them feeling like they're a part of who you are as an organization is just as important as you making them feel like they're a part of the organization overall to
Oh, that was so good. Such a great note to end on. I know it's a struggle for some people to especially initially hire and let go of certain things. But if you really want to have an impact beyond what you're providing for your clients, like the next way to do that is through your team and just seeing like a success story like yours. You know, there are people out there that want to grow within your company, but you have to make the opportunity exist.
Cause not everybody's just going to go out there and create it for themselves. Some people are more reserved and they need to be shown that it's there for them should they want it.
Yeah, 100% and that's 1 of the things I think is the most important part about being a leader. Like, if you're a firm owner, you have to transition from being a technician to being a leader and leaders recognize when people have talents and abilities to grow and scale beyond what they are what they're capable of doing today, and you have to be able to recognize that.
And once you do, you can you can invest in those people faster and help show them the path a lot easier and ultimately they have to make the decision for themselves, which is, which is great, a part of it too. But you can make a difference for them once you start showing them that path. And a lot of times they latch onto it and they're ecstatic for it.
¶ Where to Connect to Dan
Yeah. So good. Thank you so much for sharing today. I know there's so many good takeaways that people are going to get from this episode. If someone wants to connect with you, to learn about what you have going on or collaborate with you, where's the best way to do that?
Definitely. Honestly, for me, I tried Twitter. I'm not on it as much as I would like to be. I'm on LinkedIn a whole lot more. And so LinkedIn is the best way to reach out to me and please like. Just send a friend request and me a memo. I'm happy to honestly spend, you know, do phone calls with people to just have conversations. So
Oh, wonderful. Well, thank you so much for being so gracious and giving with your knowledge and your time. And yeah, thank you again.
not a problem. I appreciate it. thanks for letting me be on your podcast.